Bryan Elanko works on strategic planning and commercialization initiatives for National Oilwell Varco (NOV) in the company’s Completion & Production Solutions segment. Bryan has worked in the oil and gas industry for almost ten years across various design engineering, acquisitions planning, market research, product lifecycle, and key account management roles.

Bryan joined NOV in 2008 through the company’s leadership program, where he cycled through a rotation of R&D, instrumentation, field engineering, and quality assurance groups in different businesses. Bryan also worked with NOV in Norway as a control systems engineer responsible for developing major drilling control system packages for a series of drillships. Moving to NOV’s corporate product management group, Bryan implemented NPD systems and cross-business-unit initiatives to drive increased collaboration and innovation.

Bryan has an MBA from Rice University and a Bachelor of Science degree in Electrical Engineering from Texas A&M University.

Let’s acknowledge the key premise for what I’m about to share – “Big companies aren’t so nimble when it comes to innovation”. There are probably few cases that run contrary to this statement. But, on an aggregate basis, established companies suffer everything from bureaucracy, antiquated product development processes, complicated financial goals, which in turn impedes any sort of ‘value-adding innovation’. Now that we’ve set the premise, let’s look at one of the key factors that delay successful product launches in a big company – it goes by the name of MARKET VALIDATION.

Game changing innovations are few and far between. Incremental innovations are therefore crucial to continue to provide that value proposition to existing customers and maybe even helpful in diversifying into newer markets. While every company acknowledges the value of incremental innovations; a lot of companies still suffer from delays in product launches under this area. A lot of the blame can be traced to lack of preliminary homework which includes zero to little market validation.

There’s enough mystique surrounding market validation that product teams sometimes avoid it altogether. This takes the form of arrogance in a lot of situations where product teams assume that they know their existing customers fairly well and jump into product development in full speed. A lot of these product teams are so impatient when it comes to validating products that companies make the mistake of greenlighting projects that should’ve been avoided at all costs. And what’s the cost of greenlighting these ‘ill-timed, ill-conceived’ projects for companies? Beyond just the hits to financial goals and brand name and so on, companies get deep into the sunk cost fallacy that they’re unwilling to cut their costs and get out of those projects. Product teams are forced to somehow validate the non-existent success potential of these projects every quarter leading up to launch.

This all leads to my central thesis for this article. Market validation is needed now more than and over. But given the different functional teams and players involved; we need a form of market validation that’s nimble enough to actually work for us. We need a market validation process that can be,

Quick

Concise

Easy to execute

Additionally, we need this market validation process to incentivize product teams to fail fast and more importantly, help them learn valuable lessons for future innovations.

Let’s look at the three main items that a company needs to validate especially with regards to incremental innovation – (1) Market Pain, (2) Proposed Solution, (3) Desired Customer.

Proposed Solution should list your company’s solution as it specifically relates to the identified market pain points. How does your solution actually address every single one of those pain points?</p>

Desired Customer should state the customer(s) that have these specific market pain points and can benefit from your proposed solution. It’s important to validate the customer too as companies can always make the error of misidentifying the actual customer!

So how can hypothesis testing help?

Hypothesis Testing forces us to acknowledge the fact that a lot of incremental innovations are built on our perceptions of the industry we operate in, our perceptions of the customer pain points, among other things. Acknowledging this fact helps us to eke out assumptions that underlie our perceptions. In doing so, we can come up with the core questions that deserve answers. The philosophy of hypothesis testing when applied to each section separately – market pain, proposed solution, and desired customer – should provide the overall set of questions for the desired customer.

Let’s look at a fairly basic example from the O&G industry. Assume that one of the market pain points identified under market pain goes something like this – “The current drilling process is time consuming and expensive”.

Using the idea of hypothesis testing, the immediate next step would be to break each section of that statement down and identify the assumptions one by one. For starters, one would have to ask the question - What do ‘time consuming’ and ‘expensive’ truly mean? This thought process should lead you to your underlying assumptions. Maybe time consuming in your mind means the number of days it takes to drill a well or maybe even more specifically it might refer to non-productive time. Using the similar line of thought, expensive could refer to the day rate for contractors or specific cost of services or capital expenditure costs or so on. The idea is that this thought process should lead you to the questions that you need to pose to the ‘desired customer’. For example – one question could be – Given the state of current operations, can you elaborate on how important it is for you to reduce the overall number of days it takes to drill a well? The question can also be structured to include a likert scale to find the intensity of the customer pain. If the customer responds with a number on the lower end of the scale, it’s safe to assume (for the most part) that the customer doesn’t see this as a major pain point in the current state of business.

What does the end result look like?

The end product of a quick market validation should be 5-15 questions that help you to quickly validate/invalidate a potential incremental innovation. Try to analyze as many ‘unique’ customers possible – at least a minimum of 4-5 unique customers in the case of B2B companies.

Finally, there are a number of ways to find the answers to these questions. One-on-one customer interviews can always provide a good start. Surveys supplement the answer collection process. The only thing to watch out for in terms of surveys is the duration of the survey. You don’t want a customer to spend more than 5-10 minutes on a survey. It helps to incentivize a customer to take a survey to get some valid information. Additionally, look into existing secondary research in the form of industry studies and reports. Attend industry workshops to answer some of your questions. Recruit field/industry experts to validate/invalidate some key assumptions. Depending on the industry, focus groups can also provide a wealth of information.

In the end, realize that a market validation process that’s quick, concise, easy to execute helps you to capture value-adding incremental innovation opportunities while also substantially eliminating the ambiguity in understanding the customer pain points.